If you’ve been renting for a while, you probably are itching to buy a house. Renting can feel like you’re just throwing money away, especially with rising costs of rent in most major American cities. You’re ready to buy your own home, but you’re not sure if you can afford it. Buying a home is not only a big commitment, but it can also be a big financial debt if you’re not properly prepared.
There are a lot of things to consider that might keep you from buying a home right now. You might not know how long you plan to stay in your city or if you’re ready to afford a mortgage. This guide will assess whether you’re ready to afford a house of your own! Are you ready to take the next step in your home buying journey?
Your Current Housing Market
One of the first things to consider when looking into buying a house is the current state of your local housing market. Housing markets vary widely across the United States. While a single family house might cost a moderate amount in a rural location, you can expect to pay over twice that much in a different city. If you’re serious about getting the most value for your money when purchasing a house, you might want to look into some of the best housing markets in the United States.
How Much Do You Have Saved?
Another big question which shows how financially fit you are for homeownership is how much you have saved towards buying a house. A conventional loan requires a 20% downpayment to avoid private mortgage insurance (PMI). While it’s not impossible to afford a home without this 20% down payment, lower down payments carry more additional fees and complications. PMI rates can be between 0.05% – 1%, which can be a big chunk of cash every month on top of your mortgage. It might be worth spending more time saving for a down payment before you start looking into buying a home if you don’t have a savings plan.
What’s Your Budget?
Your budget is essential to your home search. Use an online calculator to estimate a reasonable price range for your income and savings. From there, be honest with yourself about what you do and don’t need in a home. If you want to live in a urban city, you might need to be willing to compromise on space to stay in the same price range. Similarly, you might not be able to afford to buy a new, updated home at your budget. Be flexible with your home search to get the most value for your budget.
Remember Additional Costs
There are more costs that go into buying a home than your down payment. You’ll also be expected to pay all closing and moving costs which can add up quick if you aren’t prepared! In addition to closing costs and moving fees, you’ll also be responsible for paying local taxes which often rise and fall depending on the local economy. Your budget needs to be flexible to account for any changes in taxes.
Finally, owning a home is expensive! Unlike renting, you’re responsible for all repairs and maintenance to your property. That’s why it’s important to have available savings since it’s impossible to anticipate when things will happen. You might need expensive repairs or experience unexpected damage. As a homeowner, you learn quickly you need to expect the unexpected.
Buying a House Today
It’s not always an easy decision to make the jump between renting and owning a home. While owning a home can be a great investment, it’s sometimes hard to find the funds in today’s housing market. If you’re serious about buying a home today, you still have options! From considering a more affordable location to researching loan options, home buying can still be a reality if you’re ready to make it work!